Profit-Taking Hits Gold After Retracement Test
Spot gold is sharply lower on Thursday after traders took profits following a test of an important retracement zone the previous session. The market is now trading lower for the week.
At 11:20 GMT, XAUUSD is trading $4882.22, down $82.23 or -1.66%.
Technical Traders Take Control After Spec Shakeout
I think the price action indicates that technical traders have taken over the trade following the steep sell-offs on Friday and Monday. The bullish long-term fundamentals haven’t changed, but the speculative tree has been shaken. Traders are now trying to find value so they can build a support base for the next rally. It may take weeks of back-and-forth trading before they do.
Dollar Strength and Central Bank Decisions Weigh on Sentiment
Short-term fundamental analysis has traders eyeing a rise to a two-week high by the U.S. Dollar and general nervousness ahead of rate decisions from the European Central Bank (ECB) and the Bank of England (BOE). Earlier in the week, the Reserve Bank of Australia (RBA) hiked the cash rate by 25 basis points for the first time since November 2023.
The ECB and BOE are expected to leave their rates unchanged, but gold investors want to see what they say about inflation.
Monitoring the central banks is one task for gold traders today, but the main assignment is the U.S. Dollar. I think the weakness in the stock market and the sell-off in the tech sector may have flipped the switch to risk aversion that often leads to increased demand for the U.S. Dollar.
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See all Gold forecastsFed’s Cook Signals No Rush to Cut Rates
Meanwhile, the debate in the U.S. continues as to the timing of the first Fed rate cut in 2026. Of particular interest for gold traders is late Wednesday’s somewhat hawkish comment from Federal Reserve Governor Lisa Cook, who said in a speech that she is more concerned about the lack of progress on inflation than a weakening job market. Gold traders may have read this as a bearish sign since it implies she will not support another interest rate cut until tariff-induced inflation starts to trend lower.
Familiar Swing Chart Pattern Plays Out
Technically, no surprises here with the gold market following a familiar pattern for swing chart traders. On the first leg down, long liquidation led to a test of a retracement zone at $4744.34 to $4541.88 and the 50-day moving average at $4531.05. The actual bottom was $4402.38.
On Tuesday and Wednesday, gold retraced to a potential resistance zone at $5002.31 to $5143.89, stopping at $5091.93. Then the sellers returned.
Key Support Zone Emerges at $4747.15-$4744.34
The new minor range is $4402.38 to $5091.93. A 50% correction of this range makes $4747.15 the next downside target. Buyers could step in on a test of this level since it forms a support cluster with the other 50% level at $4744.34.
Triangle Formation Likely as Traders Wait for Clarity
Over the next few weeks, we could see a triangle form as traders sell rallies and buy dips, while waiting for some clarity on Fed policy.
More Information in our Economic Calendar.
